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ITC shakes up distribution


Originally posted on 10/24/2011

While the final decision in the International Trade Commission’s (ITC) investigation into imported engineered wood from China won’t be made until late November, some distributors have told FCW that, regardless of the outcome, the proceedings have already had an impact on business. And for some, it has forced a hard look at sourcing and assortments.

“There was a lot of confusion created by the ITC action, and many suppliers dropped products in anticipation of a much worse outcome than what happened,” said Harvey Johnson at Mastercraft Flooring Distributors in Miami. “We found it paralyzing to both importers and domestic suppliers waiting to see what would happen. The result is somewhat higher prices and continued confusion in the marketplace.”

Some distributors have simply backed away from any product that could be in question. According to Debbie Giordano, vice president of wood, NRF Distributors, “We are not bringing in as much as we did due to the ITC ruling. We are more skeptical about what we bring in and we are trying not to do business with Chinese manufacturers.”

While some distributors are not heavily leveraged in imports, they said that they are nevertheless feeling some effect from the investigation. “We have seen some increases in relative pricing throughout the marketplace. Whether that truly was directly related to the ITC investigation and preliminary findings or indirectly related is hard to discern,” said one distributor who wished to remain anonymous.

Still others said that the overall impact on sales, even for those tied to imports, has not been significant enough to change a solid business model. Jeff Garber, vice president, general manager, Ohio Valley Flooring, said, “Most of the penalties were minor and we were able to have price increases to cover the additional costs. A small penalty was passed on with no effect on sales. Most of our sourced product is not produced in the U.S. so we must continue to import.”

Likewise, Hoy Lanning, CEO of CMH Space Flooring, said that the company was barely affected. “Our supplier for Chinese products had a very small fee and it is a ‘wait and see’ until the next step. We are still selling our Asian products and have increased our domestic products too.” Lanning said that CMH is limiting its importing vendors and has increased its domestic selection. However, he said, “I am not convinced we will be affected in November, but I feel certain we will have a strong offering for our dealers either way.”

The investigation has also put a spotlight on relationships. “We weren’t sure what the ruling was going to be so we didn’t take drastic action. We sell primarily domestic branded products so we may be less impacted by it than some,” said Bruce Zwicker, president and CEO, JJ Haines. “We also feel very good about the suppliers of imported Chinese wood product that we do have. We feel good in that they will figure out solutions in the short and long term.”

Jonathan Train of Swiff-Train and president of the investigation’s opposition Alliance for Free Choice and Jobs in Flooring has had to make significant shifts in his business. “It has been a huge disruption to our wood business. We have had to stop most of our new development for Chinese produced products. We had some great new, innovative products to show this year, but we cannot justify the sample investment if we cannot know our near term costs,” he said.

NRF’s Giordano said that she has noticed a decrease in the number of importers. “We used to import a lot from China years ago. But now we try to buy without importing if we can get the same item here,” she said, adding that NRF has, for example, swapped out its Chinese engineered product for a solid product as a result of the investigation.

“We really made no changes in our suppliers. However, all of them made changes and in some cases tried or did move production out of China to Indonesia,” said Johnson. “There are a number of products that have been dropped which has added cost into the channel in re-sampling and lost sales as it takes time for new products to gain traction.”

Train said that they have also changed the country of origin when possible. “We have increased our products coming from other countries to diversify our wood mix. We had to buy as much as possible to have enough inventory to ride out this period of uncertainty. If this case goes affirmative, we will have to build up new items from other places and will have to weather the transition period as best we can — we will not take on the risk of being the importer of record due to retroactive liability. We will continue to work with our domestic suppliers to provide the items that fit within their manufacturing capabilities,” he said.

Diversification is a clear key to weathering the storm. One distributor noted, “We’ve always been a bit leery of having too many eggs in an import basket. Sure, with certain products and categories, importing is sensible and even necessary.”